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It's time to bust an old property myth

The numbers often tell a different story to what is often assumed about Australia's housing markets.

'Blue-chip’ properties in ‘blue-chip’ suburbs always deliver the best capital growth, right?

Actually, the numbers often tell a different story.

Typical family homes often outperform flash houses, while average postcodes often record better long-term growth than exclusive neighbourhoods.

Don’t believe me?

Well, Australian Bureau of Statistics data covering the 15 years to the end of 2018 tell a really interesting story about supply and demand throughout the country.

Most people would assume that a world-class city like Sydney would’ve done better than a humble capital like Hobart. However, during that 15-year period, Hobart’s median house price grew twice as much – by 153.2 per cent to 75.0 per cent.

Most people would also assume that metro regions would’ve done better than the regions. However, in Queensland, the median house price rose 82.2 per cent in Brisbane compared to 109.8 per cent in the rest of the state.

InvestorKit tends to buy properties worth $300,000 to $400,000, based in smaller capitals and regional centres. The reason is that those sorts of properties often have better long-term growth potential than homes worth two or three times as much in Australia’s main metro areas.

Everyone knows that property is all about supply and demand, but when you study the data, you discover that the numbers are different to what is commonly assumed.

In percentage terms, big cities often add fewer residents than you might expect. At the same time, the amount of homes they add can fly under the radar. So people tend to overestimate demand in big cities and underestimate supply.

Conversely, despite the perception that Australians are abandoning the regions, some regional centres are growing at a fast clip. Yet residential construction is often lagging in those areas. So demand is surprisingly high and supply is surprisingly low.

That’s why, when you really drill down into the numbers, you discover that less glamorous parts of Australia often produce superior investment returns than blue-chip suburbs.

Source: The Real Estate Conversation 6th June 2019

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